Advice: Repaying your debts

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Repaying Debts

As mentioned in other areas of this site, the quicker you pay off your debts the less money you spend on the interest charged by the lender.

It therefore pays to put as much money towards your debts each month as you can. Every pound counts, so it is important to have a detailed understanding of your monthly financial situation always try to pay more to the lender that is charging you the most as that is the one you want to pay of first.

In order to pay as much as you can off your debts each month you need to establish your exact income and outgoings each month. A simple, but very useful task.

First, calculate your monthly income. Add up all money you receive each month after tax, including salary, income support, benefits, child benefit and any thing else you may get.

Second, calculate your monthly outgoings. Add up all your essential outgoings, excluding your debts. This will include the monthly mortgage/rent, gas, electricity, water rates, council tax, TV license, telephone, car insurance, household insurance, food this does not including eating out or treats and so on.

You can now calculate your net disposable income by deducting your essential monthly outgoings from your monthly income. This is the sum of money you have available each month to put towards paying off your debts.

If you have multiple debts, make those with the highest interest rates the first priority and concentrate on paying off one at a time.

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